Your Healthcare Plan: To Fully Insure or Self Insure?

1. September 2010 John Faustgen, CEBS Benefits Manager - Land O’Lakes, Inc. Your Healthcare Plan:To Fully Insure or Self Insure?

2. About Land O’ Lakes, Inc. • Fortune 250 Company with $12.1 Billion in revenue • Headquartered in Arden Hills, MN • One of America’s premiere farmer-owned cooperatives • Extensive line of agricultural supplies, state-of-the-art production and business services to farmers, co-ops and customers • Leading marketer of dairy-based products for consumers, foodservice professionals and food manufacturers. • Conducts business in all 50 states as well as internationally • More than 12,000 employees, at 200+ Locations • Approximately 1,500 union employees participate in Land O’Lakes Benefit Plans.

3. What is Fully-Insured? • When you buy a pre-packaged medical plan on the open market. • In effect you are paying someone else (an insurance company) to take on the risk and administrative expense of a medical plan. • This is known as being “fully-insured” or “fully-funded.”

4. What is Self-Insured? • When you design and pay your group’s actual medical plan claims and plan expenses. • You assume the risk of the costs of the groups claims. In essence you are your own insurance company. • This is known as “self-funded” or “self-insured.”

5. Comparison/ExampleClaims Turn Out as Projected

6. Comparison/Example Claims 10% Less than Projected

7. Comparison/ExampleClaims 10% Greater than Projected

8. Feature Increase Cash Flow Control of Reserves Flexibility of plan design, banking and re-insurance levels Portability of Plan Design Eliminates premium tax in many states Not subject to state regulations or mandates Benefit Use of $ until needed More Funds Available More control in plan design, payments and re-insurance levels Less disruption for EEs Savings of 2-4% on insured cost reductions Eliminate unnecessary costly mandated benefits Self-Funding Features and Benefits

9. Feature Predictable Monthly Cost Leverage Insurance Company’s Experience and Financial Scale Demands Less Work to Set-up Medical Plan Most Legal Regulations & Compliance Requirements Handled by Insurer Benefit Easier Budgeting Less Plan Overhead Resources needed and Transfer of Risk More straightforward for Buyer Reduced Plan Legal and Fiduciary Responsibilities Fully-Insured Features and Benefits

10. Detriments of Self-Insured • Requires More Time Involvement in Benefit Design, Installation and Ongoing Medical Plan Management • Harder to Budget Medical Plan Cost • Fiduciary and Legal Responsibilities • Claims Run-off Liability (After Plan Termination Date) • Smaller Group with ongoing High Claims

11. Detriments of Fully-Insured • Limited Selection of Medical Plan Designs • Must Adapt Insurer’s Administrative Rules • Insurer Sets Medical Plan Cost (Premiums) • Added Cost for state premium tax, mandated benefits and insurer profit. • No control in setting future plan trend or reserve levels

12. QUESTIONS?